The Business Council of Australia has called for the corporate tax rate to be cut from 30% to 15% as part of the Federal Government’s root-and-branch review of the Australian taxation system.
BCA chief executive Greg Gailey says Australia’s tax system must do more to support economic and productivity growth.
“In the tougher economic environment of the next decade, our biggest growth opportunity will come from attracting a larger share of scarce global investment capital,” Gailey says.
“Lower corporate tax and lower tax on local savings will boost investment. And higher investment in turn will raise productivity, wages and living standards over the next 20 years.”
Other methods suggested by the BCA to promote capital investment in the Australian economy include taxing companies only on ‘above normal’ profits through a tax system that is referred to an ‘allowance for corporate equity’ arrangement; and cutting tax on the capital income earned by individuals through the introduction of a dual income tax system.
“To maintain and improve our living standards in this changed world, we can and must do more to encourage foreign capital investment, increase productivity and make savings and investment more attractive.
“Lower corporate tax must be part of this equation. Independent studies show that lower tax on companies can boost investment and underpin growth,” Gailey says.
The BCA’s call is part of its detailed submission to the Federal Government’s review of the tax system, which is being led by Treasury Secretary Ken Henry.
It has also called for drastic cuts to the high number of taxes imposed on Australian companies at a state and federal level. The BCA argues that 90% of the 125 business taxes in Australia only provide 10% of government revenues.
In a suggestion that may be very unpopular with some parts of the community, the BCA suggests that governments could be compensated by the loss of revenue from the abolishment of these taxes by increases to the GST.
“Evidence from overseas strongly suggests that these measures, coupled with increases in more efficient taxes like the GST, would have a significant and positive impact on the key drivers of growth and productivity,” the submission says.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
